PEOPLEMost inhabitants of Germany are ethnic German. There are, however, more than 7 million foreign residents, most of whom are the families and descendents of so-called "guest workers" (foreign workers, mostly from Turkey, invited to Germany in the 1950's and 1960's to fill labor shortages) who remained in Germany, and Germany has a sizable ethnic Turkish population. Germany is also a prime destination for political and economic refugees from many developing countries. An ethnic Danish minority lives in the north, and a small Slavic minority known as the Sorbs lives in eastern Germany. Due to restrictive German citizenship laws, most "foreigners" do not hold German citizenship even when born and raised in Germany. However, since the German government undertook citizenship and immigration law reforms in 2002, more foreign residents have had the ability to naturalize.

Germany has one of the world's highest levels of education, technological development, and economic productivity. Since the end of World War II, the number of youths entering universities has more than tripled, and the trade and technical schools of the Federal Republic of Germany (F.R.G.) are among the world's best. With a per capita income level of more than $28,700, Germany is a broadly middle class society. A generous social welfare system provides for universal medical care, unemployment compensation, and other social needs. Millions of Germans travel abroad each year.

With unification on October 3, 1990, Germany began the major task of bringing the standard of living of Germans in the former German Democratic Republic (G.D.R.) up to that of western Germany. This has been a lengthy and difficult process due to the relative inefficiency of industrial enterprises in the former G.D.R., difficulties in resolving property ownership in eastern Germany, and the inadequate infrastructure and environmental damage that resulted from years of mismanagement under communist rule.

Economic uncertainty in eastern Germany is often cited as one factor contributing to extremist violence, primarily from the political right. Confusion about the causes of the current hardships and a need to place blame has found expression in harassment and violence by some Germans directed toward foreigners, particularly non-Europeans. The vast majority of Germans condemn such violence.

HISTORYTwo of Germany's most famous writers, Goethe and Schiller, identified the central aspect of most of Germany's history with their poetic lament, "Germany? But where is it? I cannot find that country." Until 1871, there was no "Germany." Instead, Europe's German-speaking territories were divided into several hundred kingdoms, principalities, duchies, bishoprics, fiefdoms and independent cities and towns.

Finding the answer to "the German question"--what form of statehood for the German speaking lands would arise, and which form could provide central Europe with peace and stability--has defined most of German history. This history of many independent polities has found continuity in the F.R.G.'s federal structure. It is also the basis for the decentralized nature of German political, economic, and cultural life that lasts to this day.

The Holy Roman EmpireBetween 962 and the beginning of the 19th Century, the German territories were loosely organized into the Holy Roman Empire of the German Nation. The initially non-hereditary Emperor, elected by the many princes, dukes, and bishops of the constituent lands and confirmed by the Pope, nominally governed over a vast territory, but had very limited ability to intervene in the affairs of the hundreds of entities that made up the Empire, many of which would often wage war against each other. The Empire was never able to develop into a centralized state.

Beginning in 1517 with Martin Luther's posting of his 95 Theses on the door of the Wittenberg Castle church, the German-speaking territories bore the brunt of the pan-European struggles unleashed by the Reformation. The leaders of the German kingdoms and principalities chose sides, leading to a split of the Empire into Protestant and Catholic regions, with the Protestant strongholds mostly in the North and East, the Catholic in the South and West. The split along confessional lines also laid the groundwork for the later development of the most powerful German states--Prussia and Austria--as the Prussian Hohenzollern line adopted Protestantism and the Hapsburgs remained Catholic.

The tension culminated in the 30 Years War (1618-1648), a combination of wars within the Empire and between outside European states that were fought on German land. These wars, which ended in a rough stalemate, devastated the German people and economy, definitively strengthened the rule of the various German rulers at the cost of the (Habsburg) Emperor (though Habsburg Austria remained the dominant single German entity within the Empire), and established the continued presence of both Catholics and Protestants in German territories.

The Rise of PrussiaThe 18th and 19th Centuries were marked by the rise of Prussia as the second powerful, dominant state in the German-speaking territories alongside Austria, and Austrian-Prussian rivalry became the dominant political factor in German affairs. Successive Prussian kings succeeded in modernizing, centralizing, and expanding the Prussian state, creating a modern bureaucracy and the Continent's strongest military. Despite Prussia's emphasis on militarism and authority, Prussia also became a center of the German Enlightenment and was known for its religious tolerance, with its western regions being predominantly Catholic and Jews being granted complete legal equality by 1812. After humiliating losses to Napoleon's armies, Prussia embarked on a series of administrative, military, economic, and education reforms that eventually succeeded in turning Prussia into the Continent's strongest state.

Following Napoleon's defeat, the 1814-1815 Congress of Vienna replaced the Holy Roman Empire with the German Confederation, made up of 38 independent states. A loose confederation, this construct had no common citizenship, legal system, or administrative or executive organs. It did, however, provide for a Federal Diet that met in Frankfurt--a Congress of deputies of the constituent states who would meet to discuss issues affecting the Confederation as a whole.

The Path to Unification: The Customs Union and the 1848 RevolutionsPrussia led a group of 18 German states that formed the German Customs Union in 1834, and the Prussian Thaler eventually became the common currency used in this region. The Customs Union greatly enhanced economic efficiency, and paved the way for Germany to become a single economic unit during the 19th Century's period of rapid industrialization. Austria chose to remain outside the German Customs Union, preferring instead to form its own customs union with the Hapsburg territories--a further step down the path of a unified Germany that did not include Austria.

France's 1848 February Revolution that overthrew King Louis Phillipe sparked a series of popular uprisings throughout the German states. Panicking local leaders provided several political, social, and economic concessions to the demonstrators, including agreeing to a national assembly that would discuss the constitutional form of a united Germany, individual rights, and economic order. The assembly rapidly devolved into competing factions; meanwhile, the conservative leaders of the German states reconstituted their power. When the assembly finally determined that there should be a united, federal Germany (excluding Austria) with universal male suffrage, organized as a constitutional monarchy under an Emperor--and offered that emperor title to the King of Prussia--there was no longer any interest or political reason (least of all in absolutist, powerful Prussia) for the leaders to listen. The Prussian monarch rejected the assembly's offer, and the assembly was forcefully disbanded without achieving any of the stated goals of the 1848 revolutionaries.

Nevertheless, the 1848 Revolutions did leave a lasting legacy. The factions of the ill-fated national assembly went on to develop into political parties. Certain economic and social reforms, such as the final abolition of feudal property structures, remained. The idea of German unity was firmly established. And the revolutionaries' colors--black, red, and gold--became firmly ensconced as the colors of German democratic and liberal aspirations.

Unification and Imperial GermanyGerman nationalism developed into an important unifying and sometimes liberalizing force during this time, though it became increasingly marked by an exclusionary, racially-based definition of nationhood that included anti-Semitic tendencies. However, eventual unification of Germany was essentially the result of Prussian expansionism rather than the victory of nationalist sentiment. Prussia's economic growth outstripped Austria's during the latter half of the 19th Century and Prussia-controlled Germany became one of Europe's industrial powerhouses. Under Chancellor Otto von Bismarck, Prussia defeated Austria (1866) and France (1870) in wars that paved the way for the formation of the German Empire under Emperor Wilhelm I in 1871. Germany became a federal state, with foreign and military policy determined at the national level, but most other policies remained the purview of the states.

Internally, Bismarck waged a struggle against Catholicism, which he viewed as an agent of Austria (ironically, this anti-Catholic move--which eventually failed--actually ended up consolidating a lasting political role for Germany's Catholics), and tried to both co-opt and repress the emerging socialist movement by passing the age's most progressive social insurance and worker protection legislation while clamping down on Socialist activities. Externally, Bismarck then moved to consolidate the stability of the new Empire, launching a string of diplomatic initiatives to form a complex web of alliances with other European powers to ensure that Germany did not become surrounded by hostile powers and avoid Germany's involvement in further wars.

However, Emperor William II disagreed vehemently with Bismarck, sacking him in 1890. Wilhelm II had ambitious aspirations for Germany, including acquisition of overseas colonies. His dynamic expansion of military power and confrontational foreign policies contributed to tensions on the continent. The fragile European balance of power, which Bismarck had helped to create, broke down in 1914. World War I and its aftermath, including the Treaty of Versailles, ended the German Empire.

The Weimar Republic and Fascism's Rise and DefeatThe postwar Weimar Republic (1919-33) was established as a broadly democratic state, but the government was severely handicapped and eventually doomed by economic problems and the rise of the political extremes. The dozens of political parties represented in the federal parliament never allowed stable government formation, creating political chaos. (This lesson led to the decision by the creators of the F.R.G. to limit parliamentary representation to parties that garner at least 5% of the vote.) The hyperinflation of 1923, the world depression that began in 1929, and the social unrest stemming from resentment toward the conditions of the Versailles Treaty worked to destroy the Weimar government.

The National Socialist (Nazi) Party, led by Adolf Hitler, stressed nationalist and racist themes while promising to put the unemployed back to work. The party blamed many of Germany's ills on the alleged influence of Jewish and non-German ethnic groups. The party also gained support in response to fears of growing communist strength. In the 1932 elections, the Nazis won a third of the vote. In a fragmented party structure, this gave the Nazis a powerful parliamentary caucus, and Hitler was asked to form a government. He quickly declined. The Republic eroded and Hitler had himself nominated as Reich Chancellor in January 1933. After President Paul von Hindenburg died in 1934, Hitler assumed that office as well. Once in power, Hitler and his party first undermined and then abolished democratic institutions and opposition parties. The Nazi leadership immediately jailed Jewish opposition and other figures and withdrew their political rights. The Nazis implemented a program of genocide, at first through incarceration and forced labor and then by establishing death camps. Nazi revanchism and expansionism led to World War II, which resulted in the destruction of Germany's political and economic infrastructures and led to its division.

After Germany's unconditional surrender on May 8, 1945, the United States, the United Kingdom, the U.S.S.R. and, later, France occupied the country and assumed responsibility for its administration. The commanders in chief exercised supreme authority in their respective zones and acted in concert on questions affecting the whole country.

The United States, the United Kingdom, and the Soviet Union agreed at Potsdam in August 1945 to treat Germany as a single economic unit with some central administrative departments in a decentralized framework. However, Soviet policy turned increasingly toward dominating the part of Europe where Soviet armies were present, including eastern Germany. In 1948, the Soviets, in an attempt to abrogate agreements for Four-Power control of the city, blockaded Berlin. Until May 1949, the Allied-occupied part of Berlin was kept supplied only by an Allied airlift. The "Berlin airlift" succeeded in forcing the Soviets to accept, for the time being, the Allied role and the continuation of freedom in a portion of the city, West Berlin.

Political Developments in West GermanyThe United States and the United Kingdom moved to establish a nucleus for a future German government by creating a central Economic Council for their two zones. The program later provided for a constituent assembly, an occupation statute governing relations between the Allies and the German authorities, and the political and economic merger of the French with the British and American zones. The western portion of the country became the Federal Republic of Germany.

On May 23, 1949, the Basic Law, which came to be known as the constitution of the Federal Republic of Germany, was promulgated. Konrad Adenauer became the first federal Chancellor on September 20, 1949. The next day, the occupation statute came into force, granting powers of self-government with certain exceptions.

The F.R.G. quickly progressed toward fuller sovereignty and association with its European neighbors and the Atlantic community. The London and Paris agreements of 1954 restored full sovereignty (with some exceptions) to the F.R.G. in May 1955 and opened the way for German membership in the North Atlantic Treaty Organization (NATO) and the Western European Union (WEU).

The three Western Allies retained occupation powers in Berlin and certain responsibilities for Germany as a whole, including responsibility for the determination of Germany's eastern borders. Under the new arrangements, the Allies stationed troops within the F.R.G. for NATO defense, pursuant to stationing and status-of-forces agreements. With the exception of 45,000 French troops, Allied forces were under NATO's joint defense command. (France withdrew from NATO's military command structure in 1966.)

Political life in the F.R.G. was remarkably stable and orderly. After Adenauer's chancellorship (1949-63), Ludwig Erhard (1963-66) and Kurt Georg Kiesinger (1966-69) served as Chancellor. Between 1949 and 1966 the united caucus of the Christian Democratic Union (CDU) and Christian Social Union (CSU), either alone or with the smaller Free Democratic Party (FDP), formed the government. Kiesinger's 1966-69 "Grand Coalition" included the F.R.G.'s two largest parties, CDU/CSU and the Social Democratic Party (SPD). After the 1969 election, the SPD, headed by Willy Brandt, formed a coalition government with the FDP. Brandt resigned in May 1974, after a senior member of his staff was uncovered as an East German spy.

Helmut Schmidt (SPD) succeeded Brandt, serving as Chancellor from 1974 to 1982. Hans-Dietrich Genscher, a leading FDP official, became Vice Chancellor and Foreign Minister, a position he would hold until 1992.

In October 1982, the FDP joined forces with the CDU/CSU to make CDU Chairman Helmut Kohl the Chancellor. Following national elections in March 1983, Kohl emerged in firm control of both the government and the CDU. He served until the CDU's election defeat in 1997. In 1983, a new political party, the Greens, entered the Bundestag for the first time.

Political Developments in East GermanyIn the Soviet zone, the Communist Party forced the Social Democratic Party to merge in 1946 to form the Socialist Unity Party (SED). Under Soviet direction, a constitution was drafted on May 30, 1949, and adopted on October 7 when the German Democratic Republic was proclaimed. On October 11, 1949, a SED government under Wilhelm Pieck was established. The Soviet Union and its East European allies immediately recognized the G.D.R. The United States and most other countries did not recognize the G.D.R. until a series of agreements in 1972-73.

The G.D.R. established the structures of a single-party, centralized, communist state. On July 23, 1952, the G.D.R. abolished the traditional Laender and established 14 Bezirke (districts). Formally, there existed a "National Front"--an umbrella organization nominally consisting of the SED, four other political parties controlled and directed by the SED, and the four principal mass organizations (youth, trade unions, women, and culture). However, control was clearly and solely in the hands of the SED. Balloting in G.D.R. elections was not secret. On July 17, 1953, East Germans revolted against totalitarian rule. The F.R.G. marked the bloody revolt by making the date the West German National Day, which remained until reunification.

Inter-German RelationsDuring the 1950s, East Germans fled to the West by the millions. The Soviets made the inner German border increasingly tight, but Berlin's Four-Power status countered such restrictions. Berlin thus became an escape point for even greater numbers of East Germans. On August 13, 1961, the G.D.R. began building a wall through the center of Berlin, slowing down the flood of refugees and dividing the city. The Berlin Wall became the symbol of the East's political debility and the division of Europe.

In 1969, Chancellor Brandt announced that the F.R.G. would remain firmly rooted in the Atlantic Alliance but would intensify efforts to improve relations with Eastern Europe and the G.D.R. The F.R.G. commenced this "Ostpolitik" by negotiating nonaggression treaties with the Soviet Union, Poland, Czechoslovakia, Bulgaria, and Hungary. Based upon Brandt's policies, in 1971 the Four Powers concluded a Quadripartite Agreement on Berlin to address practical questions the division posed, without prejudice to each party's view of the city's Four Power status.

The F.R.G.'s relations with the G.D.R. posed particularly difficult questions. Though anxious to relieve serious hardships for divided families and to reduce friction, the F.R.G. under Brandt was intent on holding to its concept of "two German states in one German nation." Relations improved, however, and in September 1973, the F.R.G. and the G.D.R. were admitted to the United Nations. The two Germanys exchanged permanent representatives in 1974, and, in 1987, G.D.R. head of state Erich Honecker paid an official visit to the F.R.G.

BerlinShortly after World War II, Berlin became the seat of the Allied Control Council, which was to have governed Germany as a whole until the conclusion of a peace settlement. In 1948, however, the Soviets refused to participate any longer in the quadripartite administration of Germany. They also refused to continue the joint administration of Berlin and drove the government elected by the people of Berlin out of its seat in the Soviet sector and installed a communist regime in its place. From then until unification, the Western Allies continued to exercise supreme authority--effective only in their sectors--through the Allied Kommandatura. To the degree compatible with the city's special status, however, they turned over control and management of city affairs to the Berlin Senat (executive) and House of Representatives, governing bodies established by constitutional process and chosen by free elections. The Allies and German authorities in the F.R.G. and West Berlin never recognized the communist city regime in East Berlin or G.D.R. authority there.

During the years of Berlin's isolation--176 kilometers (110 mi.) inside the former G.D.R.--the Western Allies encouraged a close relationship between the Government of West Berlin and that of the F.R.G. Representatives of the city participated as non-voting members in the F.R.G. parliament; appropriate West German agencies, such as the supreme administrative court, had their permanent seats in the city; and the governing mayor of Berlin took his turn as President of the Bundesrat. In addition, the Allies carefully consulted with the F.R.G. and Berlin Governments on foreign policy questions involving unification and the status of Berlin.

Between 1948 and 1990, major events such as fairs and festivals took place in West Berlin, and the F.R.G. encouraged investment in commerce by special concessionary tax legislation. The results of such efforts, combined with effective city administration and the Berliners' energy and spirit, were encouraging. Berlin's morale remained high, and its industrial production considerably surpassed its prewar level.

German UnificationDuring the summer of 1989, rapid changes took place in the G.D.R. Pressures for political opening throughout Eastern Europe had not seemed to affect the G.D.R. regime. However, Hungary ended its border restrictions with Austria, and a growing flood of East Germans began to take advantage of this route to West Germany. Thousands of East Germans also tried to reach the West by staging sit-ins at F.R.G. diplomatic facilities in other East European capitals. The exodus generated demands within the G.D.R. for political change, and mass demonstrations in several cities--particularly in Leipzig--continued to grow. On October 7, Soviet leader Mikhail Gorbachev visited Berlin to celebrate the 40th anniversary of the establishment of the G.D.R. and urged the East German leadership to pursue reform.

On October 18, Erich Honecker resigned and was replaced by Egon Krenz. The exodus continued unabated, and pressure for political reform mounted. Finally, on November 9, the G.D.R. allowed East Germans to travel freely. Thousands poured through the Berlin Wall into the western sectors of Berlin. The Wall was opened.

On November 28, F.R.G .Chancellor Kohl outlined a 10-point plan for the peaceful unification of the two Germanys. In December, the G.D.R. Volkskammer eliminated the SED's monopoly on power. The SED changed its name to the Party of Democratic Socialism (PDS), and numerous political groups and parties formed. The communist system had been eliminated. A new Prime Minister, Hans Modrow, headed a caretaker government that shared power with the new, democratically oriented parties.

In early February 1990, Chancellor Kohl rejected the Modrow government's proposal for a unified, neutral Germany. Kohl affirmed that a unified Germany must be a member of NATO. Finally, on March 18, the first free elections were held in the G.D.R., and Lothar de Maiziere (CDU) formed a government under a policy of expeditious unification with the F.R.G. The freely elected representatives of the Volkskammer held their first session on April 5, and the G.D.R. peacefully evolved from a communist to a democratically elected government.

Four Power Control EndsIn 1990, as a necessary step for German unification and in parallel with internal German developments, the two German states and the Four Powers--the United States, U.K., France, and the Soviet Union--negotiated to end Four Power reserved rights for Berlin and Germany as a whole. These "Two-plus-Four" negotiations were mandated at the Ottawa Open Skies conference on February 13, 1990. The six foreign ministers met four times in the ensuing months in Bonn (May 5), Berlin (June 22), Paris (July 17), and Moscow (September 12). The Polish Foreign Minister participated in the part of the Paris meeting that dealt with the Polish-German borders.

Of key importance was overcoming Soviet objections to a united Germany's membership in NATO. The Alliance was already responding to the changing circumstances, and, in NATO, issued the London Declaration on a transformed NATO. On July 16, after a bilateral meeting, Gorbachev and Kohl announced an agreement in principle to permit a united Germany in NATO. This cleared the way for the signing of the "Treaty on the Final Settlement With Respect to Germany" in Moscow on September 12. In addition to terminating Four Power rights, the treaty mandated the withdrawal of all Soviet forces from Germany by the end of 1994. This made it clear that the current borders were final and definitive, and specified the right of a united Germany to belong to NATO. It also provided for the continued presence of British, French, and American troops in Berlin during the interim period of the Soviet withdrawal. In the treaty, the Germans renounced nuclear, biological, and chemical weapons and stated their intention to reduce German armed forces to 370,000 within 3 to 4 years after the Conventional Armed Forces in Europe (CFE) Treaty, signed in Paris on November 19, 1990, entered into force.

German unification could then proceed. In accordance with Article 23 of the F.R.G.'s Basic Law, the five Laender (which had been reestablished in the G.D.R.) acceded to the F.R.G. on October 3, 1990. The F.R.G. proclaimed October 3 as its new national day. On December 2, 1990, all-German elections were held for the first time since 1933.

The Final Settlement Treaty ended Berlin's special status as a separate area under Four Power control. Under the terms of the treaty between the F.R.G. and the G.D.R., Berlin became the capital of a unified Germany. The Bundestag voted in June 1991 to make Berlin the seat of government. The Government of Germany asked the Allies to maintain a military presence in Berlin until the complete withdrawal of the Western Group of Forces (ex-Soviet) from the territory of the former G.D.R. The Russian withdrawal was completed August 31, 1994. On September 8, 1994, ceremonies marked the final departure of Western Allied troops from Berlin.

In 1999, the formal seat of the federal government moved from Bonn to Berlin. Berlin also is one of the Federal Republic's 16 Laender.

GOVERNMENT AND POLITICAL CONDITIONSThe government is parliamentary, and a democratic constitution emphasizes the protection of individual liberty and division of powers in a federal structure. The chancellor (prime minister) heads the executive branch of the federal government. The duties of the president (chief of state) are largely ceremonial; the chancellor exercises executive power. The Bundestag (lower, principal chamber of the parliament) elects the chancellor. The president is elected every 5 years on May 23 by the Federal Assembly, a body convoked only for this purpose, comprising the entire Bundestag and an equal number of state delegates.

The Bundestag, which serves a 4-year term, consists of at least twice the number of electoral districts in the country (299). When parties' directly elected seats exceed their proportional representation, they may receive more seats. The number of seats in the Bundestag was reduced to 598 for the 2002 elections. The Bundesrat (upper chamber or Federal Council) consists of 69 members who are delegates of the 16 Laender (states). The legislature has powers of exclusive jurisdiction and concurrent jurisdiction with the Laender in areas specified in the Basic Law. The Bundestag has primary legislative authority. The Bundesrat must concur on legislation concerning revenue shared by federal and state governments and those imposing responsibilities on the states.

Germany has an independent federal judiciary consisting of a constitutional court, a high court of justice, and courts with jurisdiction in administrative, financial, labor, and social matters. The highest court is the Bundesverfassungsgericht (Federal Constitutional Court), which ensures a uniform interpretation of constitutional provisions and protects the fundamental rights of the individual citizen as defined in the Basic Law.

Political PartiesChristian Democratic Union/Christian Social Union (CDU/CSU). An important aspect of postwar German politics was the emergence of a moderate, ecumenical Christian party--the Christian Democratic Union (CDU)--operating in alliance with a related Bavarian party, the Christian Social Union (CSU). Although each party maintains its own structure, the two form a common caucus in the Bundestag and do not run opposing campaigns. The CDU/CSU has adherents among Catholics, Protestants, rural interests, and members of all economic classes. It is generally conservative on economic and social policy and more identified with the Roman Catholic and Protestant churches.

Social Democratic Party (SPD). The SPD is one of the oldest organized political parties in the world. It originally advocated Marxist principles, but in the 1959 Godesberg Program abandoned the concept of a "class party" while continuing to stress social welfare programs. Although the SPD originally opposed West Germany's 1955 entry into NATO, it now strongly supports German ties with the Alliance. The SPD has a powerful base in the bigger cities and industrialized Laender.

Free Democratic Party (FDP). The FDP has traditionally been composed mainly of middle and upper class Protestants who consider themselves heirs to the European liberal tradition. It supports reducing the role of the state in economic policy, free trade, and is libertarian on social issues. The party has participated in all but three postwar federal governments and has spent only 10 years out of government in the 50-year history of the Federal Republic.

Left Party (LP)/Party of Democratic Socialism (PDS). Spurred by common opposition to government economic and social reforms, in July 2005 the PDS and the WASG (Wahlalternative Soziale Gerechtigkeit) agreed to form a left alliance for the 2005 Bundestag elections. The alliance agreed on the name "Left Party," with the option of listing PDS afterward. The WASG was established in late 2004 by western leftists, trade unionists, SPD dissidents, and former PDS members. The PDS was established in December 1989 as the successor party to the SED (the communist party of the G.D.R.). It has renounced most of the extreme aspects of SED policy but retains much of its Marxist leanings. The Left Party's focus of support is in the eastern Laender and has never received a wide following in the west.

Alliance 90/Greens. In the late 1970s, environmentalists organized politically as the Greens. Opposition to nuclear power, military power, and certain aspects of highly industrialized society were principal campaign issues. In the December 1990 all-German elections, the Greens merged with the Eastern German Alliance 90, a loose grouping of civil rights activists with diverse political views. The Greens joined a federal government for the first time in 1998, forming a coalition with the SPD.

Other parties. In addition to those parties that won representation in the Bundestag in 2005, a variety of minor parties won a cumulative 2.7% of the vote, down from 3.0% in 2002. Several other parties were on the ballot in one or more states but did not qualify for representation in the federal Bundestag.

2005 Federal ElectionsThe 2005 federal elections were held after Chancellor Schroeder asked for a Bundestag "vote of confidence" in the SPD-Greens coalition. The July 1, 2005 confidence motion failed, and President Koehler called for elections to be held on September 18, 2005, a year earlier than planned. The results of the 2005 Bundestag elections are as follows:

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CDU/CSU

35.2%

226 seats

SPD

34.2%

222 seats

FDP

9.8%

61 seats

LP/PDS

8.7%

54 seats

Greens

8.1%

51 seats

Other parties

4.0%

no representation

After several weeks of negotiations, the CDU/CSU and SPD agreed to form a "grand coalition" under the leadership of Chancellor Angela Merkel. Angela Merkel and the new cabinet were sworn in on November 22, 2005.

Germany maintains an Embassy in the United States at 4645 Reservoir Road NW, Washington, DC 20007 (tel. 202-298-4000). Consulates general are located in Atlanta, Boston, Chicago, Detroit, Houston, Los Angeles, Miami, New York, San Francisco, and Seattle. Germany has honorary consuls in more than 30 U.S. cities.

ECONOMYGermany is the world's third-largest economy and the largest in Europe. While performance has not been dynamic over the last 5 years, the German economy showed substantial improvement in 2006 due to the effect of recent economic reforms and strong global economic growth. The export-led recovery is slowly filtering through to the domestic economy where private consumption is at a low level and unemployment is still high.

From the 1948 currency reform until the early 1970s, West Germany experienced almost continuous economic expansion. Real gross domestic product (GDP) growth slowed down, and even declined, from the mid-1970s through the recession of the early 1980s. The economy then experienced 8 consecutive years of growth that ended with a downturn beginning in late 1992. Since unification, Germany has seen annual average real growth of only about 1.5% and stubbornly high unemployment. In 2006, Germany had its best year since 2000 with 2.5% growth. Economic institutes forecast between 1.4 and 2.1% growth in GDP for 2007 despite a 3% hike in the value-added-tax to 19% that became effective January 1. Unemployment in 2006 dropped to an annualized average of 9.8% nationwide, but it is still significantly higher--17.3%--in the German states that make up the former East Germany.

Germans often describe their economic system as a "social market economy." The German Government provides an extensive array of social services. The state intervenes in the economy by providing subsidies to selected sectors and by owning some segments of the economy, while promoting competition and free enterprise. The government has restructured the railroad system on a corporate basis, privatized the national airline, and is privatizing telecommunications and postal services.

The German economy is heavily export-oriented, with exports accounting for more than one-third of national output. As a result, exports traditionally have been a key element in German macroeconomic expansion. Germany is a strong advocate of closer European economic integration, and its economic and commercial policies are increasingly determined within the European Union (EU). Germany uses the common European currency, the euro, and the European Central Bank sets monetary policy.

Despite this external vulnerability, most foreign and German experts consider domestic structural problems to be the main cause of recent sluggish performance. An inflexible labor market is the main cause of persistently high unemployment. Heavy bureaucratic regulations burden many businesses and the process of starting new businesses. German employers, even during periods of relatively fast growth, say they often prefer to invest overseas or install more machinery, rather than make job-creating investments at their domestic facilities. The coalition government under the leadership of Chancellor Angela Merkel elected in 2005 agreed to address many of these issues but is faced with a skeptical German public.

Fifteen years after reunification (October 3, 1990), Germany had made great progress in raising the standard of living in eastern Germany, introducing a market economy and improving its infrastructure. At the same time, the process of convergence between east and west is taking longer than originally expected and, on some measures, has stagnated since the mid-1990s. Eastern economic growth rates have been lower than in the west in recent years, unemployment is twice as high, prompting many skilled easterners to seek work in the west, and productivity continues to lag. Eastern consumption levels are dependent on public net financial transfers from west to east totaling about $13 billion per year. In addition to social assistance payments, the government will extend funds to promote eastern economic development through 2019.

The United States is Germany's second-largest trading partner, and U.S.-German trade has continued to grow strongly. Two-way trade in goods totaled $129 billion in 2005. U.S. exports to Germany were $49.6 billion while U.S. imports from Germany were more than $79.2 billion. At $50.56 billion, the U.S.'s fifth-largest trade deficit is with Germany. Major U.S. export categories include aircraft, electrical equipment, telecommunications equipment, data processing equipment, and motor vehicles and parts. German export sales are concentrated in motor vehicles, machinery, chemicals, and heavy electrical equipment. Much bilateral trade is intra-industry or intra-firm.

Germany has a liberal foreign investment policy. For 2004, the most recent year for which statistics are available, German investment in the U.S. amounted to 135 billion euros (23% of all German foreign direct investment, or FDI; the U.S. is the number-one destination for German FDI), while U.S. investment in Germany was 87.6 billion euros (17% of all FDI invested in Germany; U.S. is third-largest source of FDI in Germany).

U.S. firms employ about 510,000 people in Germany; German firms likewise employ about 746,000 people in the United States.

Despite persistence of structural rigidities in the labor market and extensive government regulation, the economy remains strong and internationally competitive. Although production costs are very high, Germany is still an export powerhouse. Additionally, Germany is strategically placed to take advantage of the rapidly growing central European countries. The current government has addressed some of the country's structural problems, with important tax, social security, and financial sector reforms.

FOREIGN RELATIONSGermany continues to emphasize close ties with the United States, membership in NATO, and the "deepening" of integration among current members of the EU. The Federal Republic of Germany took part in all of the joint postwar efforts aimed at closer political, economic, and defense cooperation among the countries of western Europe. Germany has been a large net contributor to the EU budget. Germany also is a strong supporter of the United Nations and of the Organization for Security and Cooperation in Europe (OSCE).

During the postwar era, the Federal Republic of Germany also sought to improve its relationship with the countries of eastern Europe, first establishing trade agreements and, subsequently, diplomatic relations. With unification, German relations with the new democracies in central and eastern Europe intensified. On November 14, 1990, Germany and Poland signed a treaty confirming the Oder-Neisse border. They also concluded a cooperation treaty on June 17, 1991. Germany concluded four treaties with the Soviet Union covering the overall bilateral relationship, economic relations, the withdrawal of Soviet troops from the territory of the former G.D.R., and German support for those troops. Russia accepted obligations under these treaties as successor to the Soviet Union. Germany continues to be active economically in the states of central and eastern Europe and to actively support the development of democratic institutions, bilaterally and through the EU.

U.S.-GERMAN RELATIONSU.S.-German relations have been a focal point of American involvement in Europe since the end of World War II. Germany stands at the center of European affairs and is a key partner in U.S. relations with Europeans in NATO and the European Union.

German-American ties extend back to the colonial era. More than 7 million Germans have immigrated over the last three centuries, and today nearly a quarter of U.S. citizens claim German ancestry. In recognition of this heritage and the importance of modern-day U.S.-German ties, the U.S. President annually has proclaimed October 6, the date the first German immigrants arrived in 1623, to be "German-American Day."

U.S. policy toward Germany remains the preservation and consolidation of a close and vital relationship with Germany, not only as friends and trading partners, but also as allies sharing common institutions. During the 45 years in which Germany was divided, the U.S. role in Berlin and the large American military presence in West Germany served as symbols of the U.S. commitment to preserving peace and security in Europe. Since German unification, the U.S. commitment to these goals has not changed. The U.S. made significant reductions in its troop levels in Germany after the Cold War ended, and, on July 12, 1994, President Clinton "cased the colors" at the Berlin Brigade's deactivation ceremony. The U.S., however, continues to recognize that the security and prosperity of the United States and Germany significantly depend on each other.

As allies in NATO, the United States and Germany work side by side to maintain peace and freedom. This unity and resolve made possible the successful conclusion of the 1987 U.S.-U.S.S.R. Intermediate-Range Nuclear Forces Treaty (INF), the Two-plus-Four process--which led to the Final Settlement Treaty--and the November 1990 Conventional Armed Forces in Europe (CFE) Treaty.

More recently, the two allies have cooperated closely in peacekeeping efforts in the Balkans and have worked together to encourage the evolution of open and democratic states throughout central and eastern Europe. Germany is also a strong contributor to our common effort to secure peace and stability in Afghanistan, contributing almost 3,000 troops to the NATO ISAF mission.

Following the September 11, 2001 attacks on the World Trade Center in New York City and the Pentagon in Washington, DC, Germany has been a reliable U.S. ally in the campaign against terrorism. As two of the world's leading trading nations, the United States and Germany share a common, deep-seated commitment to an open and expanding world economy. Personal ties between the United States and Germany extend beyond immigration to include intensive foreign exchange programs, booming tourism in both directions, and the presence in Germany of large numbers of American military personnel and their dependents.

The United States and Germany have built a solid foundation of bilateral cooperation in a relationship that has changed significantly over nearly six decades. The historic unification of Germany and the role the United States played in that process have served to strengthen ties between the two countries.

German-American political, economic, and security relationships continue to be based on close consultation and coordination at the most senior levels. High-level visits take place frequently, and the United States and Germany cooperate actively in international forums.

The U.S. Embassy in Germany is located at Neustaedtische Kirchstrasse 4-5 10117 Berlin.

To call the Embassy, the country code for Germany is 49, the city code for Berlin is 30 (030 within Germany): tel: (49 30) 238-5174; fax (49 30) 238-6290. Consulates General are located in Dusseldorf, Frankfurt, Hamburg, Leipzig, and Munich. Mission Germany maintains an informative web site at: http://berlin.usembassy.gov/.